Sacrifice reliability for lower electricity prices, says AEMC

September 04, 2012

The Australian Energy Markets Commission (AEMC) has put forth new research that suggests the NSW government should be willing to sacrifice reliability in the energy networks in order to secure lower electricity prices for residents.

In a final report, released August 31, the AEMC confirmed previous findings that showed a reduction in distribution investment of between $275 million and $1.3 million over the 15 years from 2014-15 to 2028-2029 could potentially increase electricity outages by between two to fifteen minutes per annum.

However the payoff was that this could lead to savings of upwards of $15 a year for the average NSW electricity customer.

AEMC chairman John Pierce noted that such a reduction in capital expenditure would likely significantly outweigh the cost to NSW homeowners in terms of reliability.

But he also pointed out that network costs were just one of the aspects that contributed to determining the price of electricity.

"However it must be said that household bill impacts remain modest because investment to maintain existing reliability standards is just one of the drivers of network costs in this part of the supply chain. Distribution costs in turn, form just one component of electricity bills," said Mr Pierce.

As part of the submission, the AEMC also surveyed NSW residents and businesses as to the value they place on reliability in relation to increased costs.

Of 1,288 customers surveyed from across NSW, 27.3 per cent of respondents indicated that they would be willing to accept reduced reliability if the return was a discount of one per cent on electricity bills.

More than a third, 34.1 per cent, said that they would be willing to accept reduced reliability for a discount greater than two per cent.

"The value of this review is the context it provides the NSW Government for decision making into the future," said Mr Pierce.